BAR FLASHCARDS - C6 Performance
Performance of Common Law Contract
Performance does not have to be perfect
Substantial Performance is all that is required (ie party cannot commit a material breach): Meets contract’s essential performance. Material breach is if you do not have substantial performance.
Relatively easy –> just look to the terms of K to see what performance obligations re, and make sure there is SP = meets the essential purpose of the K vs. material breach not okay –> excuses the innocent party’s performance obligations
A party’s basic duty at common law is to substantially perform all that is called for in the contract.
Performance of Ks for a sale of goods (UCC)
(1) perfect tender ruler: Article 2 generally requires a perfect tender—the delivery and condition of the goods must be exactly as promised in the contract. Seller’s delivery must be perfect - at the right place and right time.
(2) Option of Cure
(3) Installment Contracts
(4) Buyer’s Acceptance of the goods
(5) Buyer’s Revocation of Acceptance of the Goods
(6) Consequences of Rejection/Revocation of Acceptance
(7) Buyer’s Obligation to Pay
Perfect Tender Rule
s must deliver perfect goods in the right place at the right time
- if tender is not 100% perfect, buyer has the right to reject the goods
Performance of Ks for a sale of goods (UCC): Seller’s Obligation of Tender and Delivery in Noncarrier Cases:
a. Noncarrier Cases:
- Tender of Delivery: In a proper tender of delivery, the seller must put and hold conforming goods at the buyer’s disposition for a time suffi- cient for the buyer to take possession.
The seller must give the buyer notice reasonably necessary to enable the buyer to take possession of the goods.
The tender must be at a reasonable hour. - Place of Delivery: In the absence of an agreement otherwise, the place of delivery generally is the seller’s place of business, or if he has none, his residence.
Performance of Ks for a sale of goods (UCC): Seller’s Obligation of Tender and Delivery in Carrier Cases
b. Carrier Cases
- Shipment Contracts: Where Seller Has Not Agreed to Tender at Particular Destination: In the absence of an agreement otherwise, the seller need not see that the goods reach the buyer, but need only:
— Put the goods into the hands of a reasonable carrier and make a reasonable contract for their transportation to the buyer
— Obtain and promptly tender any documents required by the contract or usage of trade or otherwise necessary to enable the buyer to take possession, and
— Promptly notify the buyer of the shipment
- Destination Contracts: Where Seller Has Agreed to Tender at Particular Destination: If the contract requires the seller to tender delivery of the goods at a particular destination (for example, FOB buyer’s warehouse), the seller must, at the destination, put and hold conforming goods at the buyer’s disposition.
Performance of Ks for a sale of goods (UCC): Buyer’s OBligation to PAY
Cash is great, checks are generally okay but sellers can refuse check - but this gives buyer more time to come up with the cash.
a. Delivery and Payment Concurrent Conditions:
* In noncarrier cases, unless the contract provides otherwise, a sale is for cash and the price is due concurrently with tender of delivery.
* NONCARRIER: Proper tender of delivery entitles the seller to acceptance of the goods and to payment according to the contract.
* CARRIER: However, unless otherwise agreed, when goods are shipped by carrier, the price is due only at the time and place at which the buyer receives the goods.
* Therefore, in a shipment case the price is due when the goods are put in the hands of the carrier, and in a destination contract the price is due when the goods reach the named destination.
b. Installment Contracts: In an installment contract (that is, one that requires or authorizes delivery in separate installments), the seller may demand payment for each installment if the price can be so apportioned, unless a contrary intent appears.
Payment by Check
Tender of payment by check is sufficient unless the seller demands cash and gives the buyer time to get it.
If a check is given, the buyer’s duty to pay is suspended until the check is either paid or dishonored.
If the check is paid, the buyer’s duty to pay is discharged.
If the check is dishonored, the seller may sue for the price or recover the goods.
Performance of Ks for a sale of goods (UCC): Buyer’s Right to Inspect
Buyer’s Right of Inspection: The buyer has a right to inspect the goods before they pay unless the contract provides for payment C.O.D. or otherwise indicates that the buyer has promised to pay without inspecting the goods.
IMPLIED ACCEPTANCE: buyer keeping the goods after having reasonably opportunity to inspect.
Note on Buyer’s inspection: Under UCC Article 2, unless the contract provides otherwise, any expenses for inspection of the goods sold will be borne by:
the buyer, but may be recovered from the seller if the goods do not conform and are rejected
Buyer’s Acceptance of the Goods
Implied Acceptance: B keeps goods after having an opportunity to inspect them
- if there’s a long delay between receipt and complaint (more than one month), look for implied acceptance
- merely paying for goods upfront does not = acceptance
- even if haven’t opened the box or whatever, if long delay then think implied acceptance
- Once B accepts, it’s too late for buyer to reject, BUT buyer can still get damages for seller’s breach
paying for goods upfront
paying for goods upfront does not = acceptance
Obligation of Good Faith
Article 2 requires all parties to act in good faith, which is defined as “honesty in fact and the observance of reasonable commercial standards of fair dealing.” This obligation cannot be waived by the parties.
Installment Sales Contract
Requires or authorizes seller to deliver goods in separate installments over specified period.
Rejection Under Installment K: Perfect tender rule DOES NOT apply, Buyer may reject ONLY for substantial impairment
Option of Cure
A seller who fails to make perfect tender may have an option to cure
Whether S has that option usually depends on whether the time performance has expired
- Time has not Expired - seller has option to cure
- Time Has Expired - Seller DOES NOT have an option to cure, UNLESS there is “reasonable grounds” for thinking her improper tender would have been acceptable
- **Exam Tip: look for info in facts about past deals between S and B in which B didn’t insist on perfection
Conditions
Limit obligations created by Contract language. A contract may provide that a party does not have a duty to perform unless some condition is fulfilled.
In that case, the party’s failure to perform is justified if the condition was not fulfilled.
“if”, as long as, provided, on the condition that.”
STRICT COMPLIANCE - express conditions MUST be perfeclty satisfied.
BUT, cannot sue for breach, just excuses a duty to perform.
Distinction Between Promise and Condition
Difference between whether a party is bound under a contract and whether a party who is bound has come under a duty to perform. A person is bound if there has been an offer, an acceptance, and an exchange of consid- eration. However, the contract may provide (impliedly or explicitly) that a party who is bound does not have a duty to perform unless or until some specified condition occurs. In looking at the terms of a contract, a distinction has to be drawn between an absolute promise on the one hand and a condition on the other.
Promise: A promise is a commitment to do or refrain from doing something. If a promise is unconditional, the failure to perform according to its terms is a breach of contract.
Condition: “Condition” normally means either: (1) an event or state of the world that must occur or fail to occur before a party has a duty to perform; or (2) an event or state of the world, the occurrence or nonoccurrence of which releases a party from their duty to perform. A condition is a “promise modifier.” There can be no breach of promise until the promisor is under an immediate duty to perform.
Failure of Condition vs. Breach of Contract
The failure of a contractual provision that is only a condition is not a breach of contract, but it discharges the liability of the promisor whose obligations on the conditional promise never mature.
The failure of a promise is a breach and gives rise to liability, whereas the failure of a condition relieves a party of the obligation to perform.
The failure of a promise is a ____, whereas the failure of a condition ____.
The failure of a promise is a breach and gives rise to liability, whereas the failure of a condition relieves a party of the obligation to perform.
Interpretation of Provision as Promise or Condition
What determines whether a contract provision is a promise or a condition is the “intent of the parties.”
Courts will look at the words and phrases used by the parties, their prior practices, the custom in the business community with respect to the provision, and whether performance is needed from a third party (if performance is to be rendered by a third party, it’s more likely to be a condition than an absolute promise). In doubtful situations, most courts will hold that the provision in question is a promise.
Interpretation of Provision as Promise or Condition: WORDS
Words such as “provided,” “if,” and “when” usually indicate a condition, whereas “promise” and “agree” usually indicate a promise.
“When” can be tricky. If the event following “when” is not within the obligee’s control, courts prefer to interpret it as indicating a time for performance, not a condition of performance.
In a common situation the contract states that a subcontractor will get paid “when” the general contractor is paid by the landowner.
This is not considered a condition, and the general contractor must pay the subcontractor within a reasonable time.
Express Conditions
“Express condition” normally refers to an explicit contractual provision.
It is an express statement in the contract providing that either
(1) a party does not have a duty to perform unless some event occurs or fails to occur; or
(2) if some event occurs or fails to occur, the obligation of a party to perform one or more of his duties under the contract is suspended or terminated. Conditions of satisfaction are common express conditions.
Satisfaction Condition
Satisfaction measured by a reasonable person standard UNLESS:
- Contract deals with art or personal taste.
Promisor’s Satisfaction as Condition Precedent: Many contracts include an express condition that a party will pay only if “satisfied” with the other party’s performance. Because it is a condi- tion, the promisor is under no duty to pay unless they are satisfied.
Satisfaction Condition - Mechanical Fitness, Utility, or Marketability
- Mechanical Fitness, Utility, or Marketability
In contracts involving mechanical fitness, utility, or market- ability (for example, construction or manufacturing contracts), a condition of satisfaction is fulfilled by a performance that would satisfy a reasonable person. It is therefore immaterial that the promisor was not personally satisfied if a reasonable person would have accepted and approved the performance tendered.
Satisfaction Condition - Personal Taste or Judgment
Satisfaction measured by a reasonable person standard UNLESS:
- Contract deals with art or personal taste.
Personal Taste or Judgment: If the contract involves personal taste or personal judgment (for example, portraits, dental work), a condition of satisfaction is fulfilled only if the promisor is personally satisfied.
But note: Even if a condition requires personal satisfaction, a promisor’s lack of satisfaction must be honest and in good faith.
Thus, if the promisor refuses to examine the promisee’s performance, or otherwise rejects the performance in bad faith, the condition of satisfaction will be excused.
Satisfaction of Third Person as Condition
Satisfaction of Third Person as Condition
Construction contracts often include a condition requiring the satis- faction of the owner’s architect or engineer. When the satisfaction of a third person is a condition, most courts require the actual personal satisfaction of that person. However, the condition will be excused if the third person’s dissatisfaction is not honest and in good faith.
When Purpose of Condition Is to Benefit One Party
When Purpose of Condition Is to Benefit One Party
When it is clear that the purpose of a condition is to protect or benefit only one of the parties, the other party’s duty will not be subject to the condition.
Classification of Conditions
a. Condition Precedent: A condition precedent is one that must occur before an absolute duty of immediate performance arises in the other party.
b. Conditions Concurrent: Conditions concurrent are those that are capable of occurring together, and that the parties are bound to perform at the same time (for example, tender of deed for cash). Thus, in effect, each is a condi- tion “precedent” to the other.
c. Condition Subsequent: A condition subsequent is one that, when it occurs, cuts off an already existing absolute duty of performance.
Express codnition precedent
Must occer before payment is due.
Condition Subsequent:
EVents AFTER performance that could terminate duty to pay.
A condition subsequent is one that, when it occurs, cuts off an already existing absolute duty of performance.
Constructive Conditions of Performance
The most important and common implied condition is that the duty of each party to render performance is conditioned on the other party either rendering their performance or making a tender of their perfor- mance.
Constructive Conditions of Cooperation and Notice
Constructive conditions of cooperation and notice are common. Under a constructive condition of cooperation, the obligation of one party to render performance is impliedly conditioned on the other party’s cooperation in that performance. Also, it’s often a condition to one party’s performance that the other party give notice that the performance is due. A condition of notice is most commonly applied where a party couldn’t reasonably be expected to know a fact (for example, need for repair) that triggered the duty to perform unless notice was given.
Constructive Conditions: Order of Performance
The courts sometimes imply constructive conditions relating to the time for performing under the contract.
Simultaneous Performance Possible—Conditions Concurrent: If both performances can be rendered at the same time, they are constructively concurrent; thus, each is a condition “prece- dent” to the other. So, absent excuse, each party must first tender their own performance if they wish to put the other under a duty of immediate performance that would result in breach if they fail to perform.
One Performance Takes Time—Conditions Precedent: If one performance will take a period of time to complete while the other can be rendered in an instant, completion of the longer performance is a constructive condition precedent to execution of the shorter performance.
Effect of Condition—Equitable Remedy
If a contract is not enforceable due to the failure or occurrence of a condition, and one of the parties has fully or partially performed, they can usually recover under unjust enrichment theories (see 8.3), although the measure of damages in that case may be less advanta- geous than the contract price.
Have the Conditions Been Excused?
Conditions may be excused by action or inaction of person Protected by condition.
A duty of immediate performance with respect to a conditional promise doesn’t become absolute until the conditions
(1) have been performed or
(2) legally excused.
In analyzing a question, if the facts don’t reveal performance of the applicable condition precedent or concurrent, look to see whether the condition has been excused. Excuse of conditions can arise in a variety of ways.
Excuse of Condition by Hindrance or Failure to Cooperate
If a party having a duty of performance that is subject to a condition (that is, the party protected by the condition) prevents the condi- tion from occurring, the condition will be excused if the prevention is wrongful (meaning, the other party would not have reasonably contemplated or assumed the risk of this type of conduct).
Excuse of Condition by Waiver or Estoppel
Waiver of condition: Voluntary giving up of condition’s protection.
One having the benefit of a condition under a contract may indicate by words or conduct that they will not insist on that condition’s being met. Consideration is not required for a valid waiver of condition.
Excuse of Condition by Waiver or Estoppel - Estoppel Waiver:
- Estoppel Waiver: Whenever a party indicates they are waiving a condition before it is to happen, or they are waiving some performance before it is to be rendered, and the person addressed detrimentally relies on the waiver, the courts will hold this to be a binding (estoppel) waiver. Note, however, that the promise to waive a condition may be retracted at any time before the other party has changed their position to their detriment.
Excuse of Condition by Waiver or Estoppel: - Election Waiver:
- Election Waiver: When a condition doesn’t occur or a duty of performance is broken, the beneficiary of the condition or duty must make an election; they may: (1) terminate their liability, or (2) continue under the contract. If they choose to continue, they will be deemed to have waived the condition or duty. An election waiver requires neither consideration nor estoppel (although estoppel elements are often present). Note that an election waiver cannot be withdrawn—even if the other party has not relied on it.
Excuse of Condition by Waiver or Estoppel: - Conditions that May Be Waived:
- Conditions that May Be Waived: If no consideration is given for the waiver, the condition must be ancillary or collateral to the main subject and purpose of the contract for the waiver to be effective. In other words, you cannot “waive” entitlement to the entire or substantially entire return performance.
Excuse of Condition by Waiver or Estoppel: - Waiver in Installment Contracts:
- Waiver in Installment Contracts: In an installment contract, if a waiver isn’t supported by consid- eration, the beneficiary of the waived condition can insist on strict compliance with the terms of the contract for future install- ments (so long as there has been no detrimental reliance on the waiver) by giving notice that he is revoking the waiver.
Excuse of Condition by Waiver or Estoppel: - Right to Damages for Failure of Condition:
- Right to Damages for Failure of Condition: It’s important to note that a waiver severs only the right to treat the failure of the condition as a total breach excusing counter- performance. However, the waiving party does not thereby waive her right to damages.
Excuse of Condition by Actual Breach
An actual breach of the contract when performance is due will excuse the duty of counterperformance.
Note, however, that counterperformance will be excused at common law only if the breach is material.
A minor breach may suspend this duty, but it won’t excuse it.
Excuse of Condition by Anticipatory Repudiation
Early Statement of non-performance. Provides an excuse unless it is retracted if it has not been relied upon yet.
Excuses innocent party and gives rise for breach.
Anticipatory repudiation occurs if a promisor, prior to the time set for performance of their promise, indicates that they won’t perform when the time comes. If the requirements set forth below are met, this anticipatory repudiation will serve to excuse conditions.
Anticipatory Repudiation - Executory Bilateral Contract Requirement:
Anticipatory repudiation applies only if there is a bilateral contract with executory (unperformed) duties on both sides.
Anticipatory Repudiation- Anticipatory Repudiation Must Be Unequivocal:
An anticipatory repudiation stems from the words or conduct of the promisor unequivocally indicating that he cannot or will not perform when the time comes.
